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Biden’s options for retaliating against Iran risk antagonizing China


The United States will impose sanctions on Iran’s missile and drone program, as well as entities supporting the Iranian regime or military, national security adviser Jake Sullivan announced late Tuesday.

Earlier in the day, Treasury Secretary Janet L. Yellen said additional sanctions on Iran would be forthcoming in retaliation for its attack against Israel over the weekend.

“Treasury will not hesitate to work with our allies to use our sanctions authority to continue disrupting the Iranian regime’s malign and destabilizing activity,” she said.

Experts, however, say the United States faces limited meaningful options for doing so without antagonizing China or risking a spike in the price of oil.

In retaliation for a strike against its consulate, Iran over the weekend sent more than 300 drones and missiles toward Israel. The unprecedented aerial barrage did not cause major damage or injuries, as U.S.-led forces intercepted most of the projectiles.

Still, U.S. officials and their European allies are discussing potential economic responses to Iran, as leading Western officials converged on Washington for the spring meetings of the International Monetary Fund and World Bank. Their options are limited because Iran is already one of the most heavily penalized countries in the world, with U.S. sanctions in effect on its banking, manufacturing and energy sectors.

More impactful options would include aggressively expanding sanctions on Chinese firms that have bought large quantities of Iranian crude oil exports, which have provided a financial lifeline for Tehran as it remains cut off from the West.

The United States has over the past year imposed sanctions on some commercial links in the oil trade between China and Iran, but experts say the administration could go further by hitting many more Chinese refineries and banks with the restrictions.

Doing so carries its own risks, however. Yellen and other administration officials have tried stabilizing relations with China in recent months, and a sudden blow to energy production could infuriate Beijing. Additionally, cutting off sales of Iranian crude could cause oil prices to spike globally amid tighter supply, potentially leading to higher gas prices ahead of the 2024 presidential election.

“There are not a lot of options that are game changers, because so much of Iran is already sanctioned,” said Rachel Ziemba, adjunct senior fellow at the Center for a New American Security, a foreign policy think tank. “But if you really want to cut off oil revenue for Iran, you have to go through China and Chinese institutions.”

Imposing sanctions on Chinese banks for facilitating the purchase of Iranian oil could remove as many as 1.5 million barrels per day from global markets. That would send the price of oil above $100 per barrel, in what would be a political nightmare for the Biden administration, said Bob McNally, president of the Rapidan Energy Group, a consultancy.

“The last thing Biden wants is higher gas prices, so he wants Iran selling its oil to China. He does not want that oil to be shut in. It’s as simple as that; he can’t afford to sanction Iran’s oil,” McNally said. “They could do some symbolic stuff, to go after a little trader here or there, but that’s likely about it.”

President Biden has urged calm in the wake of Iran’s attack. The United States has made clear it will not participate in any Israeli military attack against Iran, and senior officials have stressed that their aims are to “de-escalate regional tensions” to prevent a broader conflagration. Israel’s war cabinet met on Monday to deliberate potential responses.

While the West is ruling out participating in a military response, an economic response to Iran’s actions appears increasingly certain. European Commission President Ursula von der Leyen said officials in Brussels would discuss tougher sanctions against Iran. “We will reflect on additional sanctions against Iran in close cooperation with our partners,” she said in a statement.

The Biden administration also faces pressure from Capitol Hill to act. The House overwhelmingly approved legislation on Monday aimed at cracking down on Iranian oil sales to China. Critics have argued that Biden should have gone further to ensure Tehran is not able to reap billions from its oil exports.

“In the wake of Iran’s massive and disproportionate attack on Israel, and with an eye toward escalation, all nonmilitary measures must be on the table. This includes targeting Iran’s ongoing oil sales,” said Matthew Levitt, director of the Jeanette and Eli Reinhard Program on Counterterrorism and Intelligence at the Washington Institute for Near East Policy, a D.C.-based think tank.

Still, other experts say the challenge is that Washington has already been too aggressive in its posture toward Tehran. Iran has been under severe economic restrictions since the Trump administration abandoned the nuclear deal reached by President Barack Obama, and that gives policymakers little room to operate in the face of new emergencies.

“There’s not much more that can be done,” said Esfandyar Batmanghelidj, founder and CEO of the Bourse & Bazaar Foundation, a think tank focused on international affairs and economic diplomacy. “This is really the problem with maximum pressure: You end up in a position where suddenly what you think is a question of Iran policy is no longer just a question of Iran policy.”

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